Wall St Week Ahead: For stocks, September starts on upbeat note

By Caroline Valetkevitch

NEW YORK, Sept 3 (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) could start next
week with investors feeling a bit more optimistic about the
economy, thanks to a stronger-than-expected jobs report, making
further market gains more likely.

The government’s nonfarm payrolls report on Friday was the
latest of the week’s data to suggest the economy may not be
headed for another severe downturn, as many investors have
feared.

All three major U.S. stock indexes rallied more than 1
percent on Friday. The Standard & Poor’s 500 Index (.SPX: )
scored a gain of 3.8 percent for the week, marking its best
week in eight, and starting September — typically the weakest
month for the market — on a strong note. In contrast, for the
month of August, the S&P 500 fell 4.7 percent.

“The data forces a re-evaluation of the underlying thesis
of the economy, and how the stock market is priced,” said
Charles Lieberman, chief investment officer of Advisors Capital
Management, LLC in Hasbrouck Heights, New Jersey.

“The employment report is really the keystone. If the
economy is producing jobs, the thesis of a decline in the
economy goes out the window,” he said.

Next week, the economic calendar will be light, especially
since it will be a holiday-shortened week with the U.S. stock
market closed for Labor Day on Monday. But the agenda will
include the international trade deficit data, which investors
will scrutinize for clues on spending, as well as the latest
weekly jobless claims numbers.

High unemployment and weak consumer spending have been
among the toughest hurdles to sustaining the economy’s recovery
from the worst downturn since the 1930s.

Though the stock market ended this week with gains, the S&P
500 was unable to break out of a trading range of between 1,040
and 1,130, and some analysts see that range-bound trend
continuing.

“I think we’re in rally mode. In no way do I see us going
through new highs or breaking through the trading range, but I
see strength after the holiday,” said Alan Lancz, president of
Alan B. Lancz & Associates Inc. in Toledo, Ohio.

“We still see this as a two-steps-forward, one-step-back
type market … but we’ll take what we can get.”

SEPTEMBER’S BAGGAGE

For the week, the Dow Jones industrial average (.DJI: ) rose
2.9 percent, while the S&P 500 advanced 3.8 percent and the
Nasdaq (.IXIC: ) gained 3.7 percent.

That’s a promising start, but history shows that this month
isn’t one that Wall Street’s denizens will “Try to Remember,” a
la the iconic song from “The Fantasticks” of Off-Broadway
fame.

September is typically the weakest month for stock market
performance, according to the Stock Trader’s Almanac. The S&P
500 has declined 0.7 percent on average during September in the
years since 1950, the Almanac says.

However, on the day after Labor Day, the Dow has risen in
12 of the last 15 times, the Almanac notes.

Friday’s jobs report was the catalyst for a bullish end to
the week for stocks because it showed that although overall
payrolls shed jobs for the month of August, the decline was
much less than expected. And providing a bright spot, private
payrolls rose more than expected.

Analysts said the news gave a ray of hope for the recovery.
Other data this week showed an unexpected rise in the Institute
for Supply Management index on U.S. manufacturing,
stronger-than-expected pending homes sales in July, and a
second consecutive week of lower claims for initial jobless
benefits.

The data means “we are probably not looking at a double
dip,” said Marc Pado, U.S. market strategist at Cantor
Fitzgerald & Co. in San Francisco.

Next week’s data includes reports on international trade on
Thursday and wholesale inventories on Friday.

A surge in imports dampened growth in the second quarter.

U.S. government data next week is expected to show the
international trade deficit narrowed somewhat to $47.2 billion
in July, according to economists polled by Reuters, after
rising to $49.9 billion in June, the highest since October
2008.

Analysts believe sluggish domestic demand should cause a
moderation in the growth of imports in coming months, while
they expect U.S. exports to strengthen. As a result, the trade
gap should be less of a drag on the economy.

Initial jobless claims, also expected on Thursday, are seen
dipping to a seasonally adjusted 470,000 for the week from
472,000 previously.

Wholesale inventories for July, due on Friday, are forecast
to rise 0.4 percent, the Reuters poll showed, following June’s
gain of just 0.1 percent. That report also will shed light on
wholesale sales, seen up 0.3 percent in July, following June’s
decline of 0.7 percent.
(Wall St Week Ahead runs every Friday. Any questions or
comments on this column can be e-mailed to:
caroline.valetkevitch(at)reuters.com)
(Reporting by Caroline Valetkevitch; Additional reporting by
Lucia Mutikani and Chuck Mikolajczak; Editing by Jan Paschal)

Wall St Week Ahead: For stocks, September starts on upbeat note